Wynn Resorts and Caesars Entertainment win legal victory on the use of dynamic pricing

[Las Vegas Strip and pink clouds]
Gary Yeowell

The U.S. Court of Appeals for the Ninth Circuit affirmed the dismissal of a class action lawsuit against Wynn Resorts (NASDAQ:WYNN [https://seekingalpha.com/symbol/WYNN]), Caesars Entertainment (NASDAQ:CZR [https://seekingalpha.com/symbol/CZR]), and Treasure Island in a notable legal victory for the hospitality players.

The suit alleged that the hotel operators violated antitrust laws by coordinating to raise hotel room rates on the Las Vegas Strip through the use of shared revenue management software platforms, including specifically those provided by Cendyn Group and its subsidiary, Rainmaker.

The appellate court ruled that the plaintiffs failed to establish a sufficient antitrust claim. The judges found that the use of common pricing software did not, in itself, constitute evidence of an illegal agreement to fix prices. Instead, the court emphasized that merely contracting with the same service provider and subsequently seeing higher prices is not enough to prove a conspiracy or restraint of trade under Section 1 of the Sherman Act.

In the ruling, the judges also noted that the software licensing agreements did not impose any anticompetitive restraints. Rather, the decision highlighted that a shift in business strategy from maximizing occupancy to maximizing profitability via higher rates was not inherently anticompetitive or unlawful. Notably, the panel upheld the district court’s decision to dismiss the plaintiffs' claims with prejudice, effectively ending this attempt to pursue damages or injunctions against the hotel companies for their use of such revenue management technology.

Analyst think the outcome is a significant victory for the resort industry in general and could set a tough precedent for future class actions seeking to challenge dynamic pricing or algorithm-driven rate recommendations in the hospitality sector.

Wynn Resorts (NASDAQ:WYNN [https://seekingalpha.com/symbol/WYNN]) and Caesars Entertainment (NASDAQ:CZR [https://seekingalpha.com/symbol/CZR]) traded slightly lower in premarket action on Monday. The Treasury Island resort is owned and operated by businessman Phil Ruffin.

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